Medallion Financial Q2 Medallion Loans Lowest Since 2003

Medallion Financial, a commercial finance company that originates and services loans in various niche industries, announced its Q2/18 results.

Effective April 2, 2018, Medallion Financial withdrew its BDC election, and now operates as a commercial finance company following the reporting conventions of bank holding companies, beginning with Q2/18. A major component of this change is that the company will now consolidate wholly-owned or controlled subsidiaries, particularly Medallion Bank, which were previously treated as unconsolidated portfolio investment companies.

Q2/18 Highlights

  • Total assets reached $1.53 billion as of June 30, 2018.
  • Medallion loans are at the lowest level since 2003. The company’s net medallion lending portfolio as of June 30, 2018 was $258.1 million compared to $452.7 million at the end of the same period in 2017.
  • Net interest income before the provision for loan losses was $24.7 million, reflecting primarily the contributions of the consumer lending segments.
  • Net loss was $14.6 million, a slight improvement from the first quarter, and included a charge of $6.7 million to establish a general reserve on medallion loans less than 90 days past due.
  • Net interest margin was 8.57% in Q2/18, compared to 6.64% in the prior year period on a combined basis with Medallion Bank.
  • Provision for medallion loan losses was $24.8 million for Q2/18, down significantly from $62.7 million in the first quarter.
  • 90 day plus medallion loan delinquencies were 4.5% of gross medallion loans, down to $12 million, a significant improvement from $112 million one year ago

“We are pleased to present the company as a consolidated entity this quarter and to be able to report as a bank holding company only for accounting purposes, beginning with the 2018 second quarter,” Andrew Murstein, president of Medallion Financial, said. “We continue to highlight the strength of our consumer and commercial lending segments as we remain focused on the strategy we laid out in 2017. Net interest income was $24.7 million, providing a solid foundation for our future growth.”

“When looking at our taxi medallion portfolio, we remain cautiously optimistic that prices have reached the floor, as we valued our nonperforming New York City medallion collateral at $181,000 and wheelchair accessible medallion collateral at $154,000. We reported the lowest delinquency rate as a percentage of the portfolio since the fourth quarter of 2015. As previously commented, we commend the New York City Council for passing a for-hire vehicle reform package which included, among other things, capping ride-hailing services and giving authority to the TLC to set minimum pay standards for those drivers. We hope such measures should not only level the playing field between taxis and ride-hailing services but also alleviate the congestion that has left our streets in a state of gridlock. In the last few years we have reserved or charged off over $300 million of medallion loans. Our goal, as the market further stabilizes and hopefully improves, is to recover as much of that amount as possible.”

The company’s net medallion lending portfolio as of June 30, 2018 was $258.1 million compared to $452.7 million at June 30, 2017, on a combined basis with Medallion Bank, a 43% decrease. The average interest rate on the medallion portfolio was 4.48% versus 4.31% on a combined basis with Medallion Bank in the prior year period. Total medallion delinquencies over 90 days were $12.4 million as of June 30, 2018, compared to $112.4 million from the prior year period on a combined basis with Medallion Bank. The decline reflects the charge-offs of certain loans and their movement to loan collateral in process of foreclosure, in addition to the netting of reserves against principal as of April 2, 2018, in connection with the change in reporting status. Medallion provision for loan losses was $24.8 million in the quarter, down significantly from $62.7 million in the prior quarter.

Larry Hall, Medallion’s chief financial officer, said, “We continue to move away from our medallion lending and focus on our more profitable lines of business in consumer and mezzanine lending. As of June 30, 2018, total medallion loan exposure has been reduced substantially to $258 million, down from a high of approximately $650 million three years ago. Net medallion loans now represent just 16.8% of total assets. We have also been in discussion with one of our lenders to make certain structural changes to our facility. If we are successful, we would be able to deconsolidate the trust that owns various medallion loans from our overall results, which would eliminate a significant amount of medallion exposure from our balance sheet, and allow for the recapture of approximately $20 million in reserves associated with medallion loans that the company is not liable for. That would then further reduce our total medallion exposure to approximately $205 million, a 26% reduction from June 30, 2018. While we are hopeful we can accomplish this, there can be no guarantees that this restructuring closes and that we would achieve this positive result.”

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Terry Mulreany
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